The Hungarian family tax relief prominently helps families even in international comparisons

Written on 01 June 2020.

The Hungarian family tax relief prominently helps families even in international comparisons
June 1, 2020

The Hungarian family tax system makes a significant contribution to increasing the income of families, according to a survey by the Tax Foundation, founded in 1937, which analyzes tax policy and the social impact of certain tax systems. In its May 2020 analysis, the organization points out that the level of family tax relief provided by European states differs significantly, but Hungary is at the forefront among them.

Targeted tax relief for families were measured by comparing the tax burdens on labor (‘tax wedge’) of a single-earner family with two children and a childless, single worker with the same pre-tax gross income. In the countries studied, single-earner families with two children faced on average a tax burden of 29.6% in 2019, while the average tax burden of a childless, single worker was 40.1%, which is 10.5 percentage points higher than that of a family with two children.

Since the introduction of the system of family taxation in 2011 and its extension to contributions in 2014, the Hungarian government has doubled and increased the amount of personal income tax relief available to families with two children to HUF 20,000 per child per month, as a result of which Hungary ranks place 7 of the list (with a 15% difference), that is, a difference in tax rates close to that of Germany and Slovenia. Thus, the monthly net income of a Hungarian family with two children is 15% higher due to family taxation than that of a childless worker. However, this survey did not include the tax relief available to large families, which amounts to HUF 33,000 per child per month for third (and additional) children, while no other country provides total personal income tax exemption for mothers with four children outside Hungary.

The difference in the tax wedge is the greatest in Luxembourg (-21.1%), followed by Poland (-17.9%) and the Czech Republic (-17.3%). On the other hand, the difference between the tax wedges was the smallest in Turkey, where the difference was only -1.7 percentage points, with Greece (-3.0%) and Norway (-3.6%) at the bottom of the list. The bigger difference means more extensive tax relief for families.

Tax burden in percentage points in Europe

Source:
https://taxfoundation.org/tax-relief-for-families-europe-2020/?fbclid=IwAR2cayaLMW4mpbq6owk_cqzW1t6ux_yednjX0ikAiVU0IjCAHQPf317Uu58
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